Report Summary

Period covered: March 2025

3 minute read

Note: This report summary is one or two months behind the current month as standard reporting practice. The content is indicative only and incomplete with certain data undisclosed. Subscribe to access this data or take out a free 30 day subscription trial now.

Inflation

Headline inflation eases further: CPI inflation fell to xx% in March, from xx% in February, beating expectations.

The fall was driven by declines in recreation, motor fuel, and housing-related costs, with further support from weaker food price growth. Clothing prices provided the main upward push, reversing February’s discount-led fall.

Core inflation moderates: Core CPI dipped to xx% in March, from xx% in February, continuing its steady downward trend.

Goods and services inflation: Goods inflation slowed to xx%, down from xx%, helped by falling motor fuel prices and weaker demand-driven price adjustments in discretionary categories like clothing and household items.

Services inflation eased to xx%, from xx%, with softer prices in recreation, hotels, and housing services, though still above the Bank of England’s comfort zone.

Recreation and culture cools sharply: Annual inflation in this sector fell to xx%, from xx%, the lowest in over three years. Computer games and hobby-related goods saw price drops, aided by improving supply chains and slower consumer demand.

Transport inflation falls: Transport prices rose xx% year-on-year, down from xx%, driven by a xx% drop in motor fuel prices.

Petrol and diesel prices fell on the back of easing oil markets, helping to offset pressures elsewhere.

Restaurants and hotels see price growth slow: Inflation in this category eased to xx%, from xx%, the lowest since mid-2021.

Accommodation services saw weaker growth, suggesting that consumers are becoming more price-sensitive in discretionary spending areas.

Food inflation continues to slow: Food and non-alcoholic beverage inflation eased to xx%, from xx%. Prices were flat month-on-month, with declines in confectionery balancing slight rises in dairy.

Clothing prices rebound: Clothing and footwear inflation rose to xx%, from -xx%, as discounting activity reduced. A xx% monthly rise reflected stronger-than-expected demand for new season stock.

Financial Market Reaction: Markets reacted by strengthening expectations for a May rate cut, with odds rising to xx%. The pound gained modestly against the dollar, while gilt yields adjusted lower before stabilising.

Inflation outlook: The easing in headline and core inflation strengthens the case for a May rate cut, with services inflation starting to slow in line with market expectations.

However, headline CPI is set to rise in the coming months, driven by April’s higher energy price cap, increased water bills, and the impact of annual price resets across key services.

The Bank of England expects inflation to peak in late summer, before easing towards xx% in 2026. Policymakers are likely to focus on domestic cost pressures, particularly wage growth and services inflation, rather than short-term headline volatility.

Markets have now fully price in three rate cuts this year, with Bank Rate expected to fall to xx% by year-end and reach xx% in 2026, assuming external risks, including global trade tensions, remain contained.

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CPI inflation fell to 2.6% in March, from 2.8% in February, beating expectations.